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Saturday, 7 September 2013

KUALA LUMPUR] India has started its first Syariah- compliant investment company, seeking to tap Islamic wealth to fund a US$1 trillion infrastructure spending plan even as the rupee plunges.

Cheraman Financial Services Ltd, which began operations in July, is seeking to raise more than 20 billion rupees (S$377 million) over two years, managing director Mohammed Hanish said in a Sept 2 interview. The firm, based in Kochi in south-western Kerala state, is seeking capital from India, the Middle East and South-east Asia that could be used to finance the government's five-year development programme, he said.

The initiative will be a game changer for new institutions and foreign investment at a time when the economy faces challenges, including a record current account deficit, according to Ernst & Young LLP. India has resisted introducing Islamic banking laws since at least 2008 amid opposition from the country's majority Hindu population.

"Islamic finance can be a quick-win solution to address part of the challenges India faces today," Ashar Nazim, Bahrain-based partner at Ernst & Young, said in a Sept 3 interview. "The risk, on the other hand, of a failed experiment is it will hurt the credibility of the industry big time in India and push it back another 5-10 years."